Welcome to the September 2012 edition of The Director's Dilemma.

The newsletter provides case studies that have been written to help you to develop your judgement as a company director. The case studies are based upon real life; they focus on complex and challenging boardroom issues which can be resolved in a variety of ways. There is often no single 'correct' answer; just an answer that is more likely to work given the circumstances and personalities of the case.

These are real life cases; the names and some circumstances have been altered to ensure anonymity. Each potential solution to the case study has different pros and cons for the individuals and companies concerned. Every month this newsletter presents an issue and several responses.

Consider: Which response would you choose and why?

Olba has been appointed to a government sector board to represent her local peoples in decision-making and resource allocation. The organisation has been constituted with legislation that mirrors many provisions of the Corporations Act. Directors are not paid but Olba is happy to gain experience and serve the community.

The Minister appoints the board members and also a 'facilitator' to chair the board meetings. Olba resents the facilitator and knows that her colleagues on the board share her feelings. The government use this facilitator for a number of board and committee functions; she is well credentialed, politically well-connected, and somehow a 'power behind the throne' with several local organisations.

The facilitator is paid a sitting fee and does not appear to carry the duties that are imposed upon directors under the legislation. She is also often late for the meetings, arrives without having read the papers beforehand, and, on one memorable occasion, got some way through the agenda before realising which board she was chairing. This appeared to be a major conflict of interest as it became obvious she was currently also chairing a board that competes with Olba's board for funds.

Olba has completed some governance training and read much on the topic. She aspires to be a prominent and useful board member and a good ambassador for her people. The facilitator could cause an embarrassment that would thwart Olba's aspirations. She is also, in Olba's opinion, not performing well enough and possibly harming the organisation.

What should Olba do?

Gene's Answer

Boards of directors have similar issues to conquer if they want to be effective, whether in the corporate, government or non-profit arena. In this case the issue is effective governance, and Olba has two courses of action that she might pursue.

First, recognizing the 'power behind the throne' influence of the facilitator, Olba might conclude the board will be forever hampered in its effectiveness by inferior leadership, in which case she should resign and join another board that doesn't have that problem.

But board members are leaders, or aspire to be, and so that is not the course of action I would recommend for Olba.

I suggest instead that Olba propose to the board a governance manual or policy document that outlines the duties and responsibilities of each board member, including the facilitator. Such a document is increasingly used by boards in the US to define roles and ensures effective communication to prospective directors as well as incumbents. Also, an all-inclusive policy document should not be seen as an attack on any participant, but an attempt to help all participants do the right thing.

How might that help? Any well written description of a facilitator's duties will include advance preparedness, timely arrival and effective participation. It should soon be clear to all that attend - although it might already be clear to those present - that the facilitator doesn't fulfil that duty properly, and it would be possible to support that claim with documented policy language.

At that point the board would have a basis to support approaching the Minister with a request for a change. If that fails, perhaps going to my first suggestion would be best for Olba.

Gene Siciliano is President at Western Management Associates. He is based in Los Angeles, USA.

Julie's Answer

It is hard to manage a board when directors have different levels of commitment, power and liability. Olba should not worry about struggling with this problem; it would make many experienced directors turn and run.

Olba must show leadership to her colleagues and the Minister without showing enmity to the facilitator. She also needs to get to know people in key positions within the relevant government department and build a strong relationship of respect and trust. This is going to require some steadfast and resolute action.

First, Olba should arrange for board training. This will give the directors information on contemporary views of the Chair's duties. It will also establish that this board is serious about performance.

The facilitator should be invited to attend the training. After the training the board should discuss what they have learned and how to put it into practice. Then they can develop a charter, position descriptions and other pieces of a performance framework to establish clear standards of professional conduct. Once the framework is in place it can be used as a base for performance assessment. It should set out how the board will manage conflicts of interest and exclude people with conflicts from taking part in discussions and access to information. Conflicts are serious issues for government boards and this is Olba's best leverage at the moment.

It is not clear if this board has a director Chairman. It needs one. Olba may not wish to fill this role yet but could instigate a move to create the role. It is also not clear who prepares the board agendas; if this is a director, then Olba should align herself with him or her to create a focus for board leadership. If it is a staff member, then Olba needs to find a director who is prepared to step into the Chair role and work with that staff member.

When the board is functioning properly the facilitator will become less relevant and, eventually, the board will demonstrate that they are capable of leading themselves and their organisation.

Julie Garland McLellan is a practising non-executive director and board consultant based in Sydney, Australia.

Douglas' Answer

Since Olba sees that the facilitator is having difficulties, perhaps she should approach her and offer her assistance in offloading some tasks that would help the facilitator be more effective. Olba can suggest that she text the facilitator with the agenda a day beforehand, covering the key issues and discussion questions. Instead of a critic, she should offer to be a bridge. She might find a kindred spirit in the facilitator and as the relationship develops, ask her to be her mentor.

People like the facilitator are beholden to their power base. As a representative of the Minister, she is going to play to the team who can serve her (and her Minister's) aspirations best. Olba should attempt to learn what makes the facilitator tick, what motivates her, what encourages her, and, of course, what irritates her. She should also learn as much as she can about the Minister's political challenges and plans in order to align the goals of her organization with those of the Minister's.

Douglas Marlowe is a Principal at teachITnow, a technology consulting and training firm based in Boynton Beach, Florida, USA.

Disclaimer

The opinions expressed above are general in nature and are designed to help you to develop your judgement as a director. They are not a definitive legal ruling. Names and some circumstances in the case study have been changed to ensure anonymity. Contributors to this newsletter comment in the context of their own jurisdiction; readers should check their local laws and regulations as they may be very different.

What's New

Dilemmas, Dilemmas - This issue of the newsletter has focused on a novel governance structure and the unintended adverse consequences that can be generated when we ignore normal board composition and practices. The Dilemmas, Dilemmas books target similar issues with practical ideas for managing difficult situations.

Book review - It is the end of the financial year in Australia and, like most of my local colleagues, I have been busy with audits and reviews prior to issuing annual reports and accounts. A resource that I find particularly useful in all this activity is David Hey-Cunningham's 'Financial Statements Demystified'. Here is my review of his book.

Inspirational quote - I find these quotes a good way to get into a positive frame of mind for the work day ahead. My favourite quote for this month is:

"Decide whether or not the goal is worth the risk involved. If it is, stop worrying."
~Amelia Earhardt

If you would like to subscribe the service is run by Darren La Croix at: quotes@darrenlacroix.com.

This newsletter - If you have any ideas for improving the newsletter please let me know. If you are reading a forwarded copy please visit my website and sign up for your own subscription.

Suggestions for dilemmas - Thank you to all the readers who have suggested dilemmas. I will answer them all eventually.

Farewell until the next issue (due 1 October 2012).

Enjoy governing your corporations; we are privileged to do what we do!

Best regards
Julie

www.mclellan.com.au | PO Box 97 Killara NSW 2071
email julie@mclellan.com.au | phone +61 2 9499 8700 | mobile +61 411 262 470 | fax +61 2 9499 8711